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Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data

Author

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  • Drenik, Andres

    (University of Texas at Austin)

  • Jäger, Simon

    (Massachusetts Institute of Technology)

  • Plotkin, Pascuel

    (University of British Columbia)

  • Schoefer, Benjamin

    (University of California, Berkeley)

Abstract

We estimate how much firms differentiate pay premia between regular and outsourced workers. We study temp agency work arrangements where pay setting has previously escaped measurement because existing datasets do not report links between user firms (the workplaces where temp workers perform their labor) and temp agencies (their formal employers). We overcome this measurement challenge by leveraging unique administrative data from Argentina with such links. We estimate that temp agency workers receive 49% of the workplace-specific pay premia earned by regularworkers in user firms: the midpoint between the benchmark for insiders (one) and the competitive spot-labor market benchmark (zero).

Suggested Citation

  • Drenik, Andres & Jäger, Simon & Plotkin, Pascuel & Schoefer, Benjamin, 2020. "Paying Outsourced Labor: Direct Evidence from Linked Temp Agency-Worker-Client Data," IZA Discussion Papers 13076, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13076
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    References listed on IDEAS

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    13. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
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    Cited by:

    1. Antonin Bergeaud & Clement Malgouyres & Clement Mazet-Sonilhac & Sara Signorelli, 2021. "Technological change and domestic outsourcing," CEP Discussion Papers dp1784, Centre for Economic Performance, LSE.
    2. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Pisch, Frank & Berlingieri, Giuseppe, 2022. "Managing Export Complexity: The Role of Service Outsourcing," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 135680, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    4. Simonsen, Marianne & Skipper, Lars & Skipper, Niels & Thingholm, Peter Rønø, 2021. "Discontinuity in care: Practice closures among primary care providers and patient health care utilization," Journal of Health Economics, Elsevier, vol. 80(C).
    5. Koning, Pierre & Muller, Paul & Prudon, Roger, 2022. "Why Do Temporary Workers Have Higher Disability Insurance Risks Than Permanent Workers?," IZA Discussion Papers 15173, Institute of Labor Economics (IZA).
    6. Wouter Zwysen, 2024. "Working apart: Domestic outsourcing in Europe," European Journal of Industrial Relations, , vol. 30(2), pages 221-241, June.
    7. Benjamin Schoefer & Oren Ziv, 2021. "Productivity, Place, and Plants," NBER Working Papers 28772, National Bureau of Economic Research, Inc.
    8. Pilar Beneito & Maria Garcia-Vega & Oscar Vicente-Chirivella & Guillaume Wilemme, 2024. "Robots and firms’ labour search: The role of temporary work agencies," Discussion Papers 2024-02, University of Nottingham, GEP.
    9. Mark Kattenberg & Bas Scheer & Jurre Thiel, 2023. "Causal forests with fixed effects for treatment effect heterogeneity in difference-in-differences," CPB Discussion Paper 452, CPB Netherlands Bureau for Economic Policy Analysis.
    10. FUKAI Taiyo & KAWAGUCHI Daiji & KONDO Ayako & YOKOYAMA Izumi, 2023. "How Do Firms Attain Internal and External Flexibility of Employment?," Discussion papers 23089, Research Institute of Economy, Trade and Industry (RIETI).
    11. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
    12. Carreño, José Gabo & Uras, Burak, 2024. "Macro welfare effects of flexible labor contracts," European Economic Review, Elsevier, vol. 161(C).
    13. Amior, Michael & Stuhler, Jan, 2023. "Immigration, Monopsony and the Distribution of Firm Pay," IZA Discussion Papers 16692, Institute of Labor Economics (IZA).
    14. Adrien Bilal & Hugo Lhuillier, 2021. "Outsourcing, Inequality and Aggregate Output," Working Papers 2021-05, Becker Friedman Institute for Research In Economics.

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    More about this item

    Keywords

    temp agencies; non-standard work arrangements; outsourcing; rent sharing;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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